Under consolidation, only the head company can operate FIF attribution accounts and FIF attributed tax accounts for the purposes of the FIF measures during the period of consolidation.
The pre-consolidation surplus balances of the FIF attribution accounts and FIF attributed tax accounts of subsidiary members of the group are transferred to the head company (or MEC group), at formation or when a subsidiary member joins the consolidated group (or MEC group). This ensures that distributions from FIFs are not taxed to the head company where the joining entity has already been subject to FIF taxation.
Once the account balances have been transferred to the head company of a consolidated group (or MEC group) the FIF attribution accounts and FIF attributed tax accounts of subsidiary members become inoperative during the period the entity is a member of the consolidated group (or MEC group).
When an entity with an interest in a FIF leaves a group, a proportion of the head company's FIF attribution account and FIF attributed tax account surpluses that the head company has in relation to the interests in the FIF that leaves the group with the leaving entity are transferred to the leaving entity.
The date of effect of consolidation and the related provisions regarding FIF attribution accounts and FIF attributed tax accounts is 1 July 2002. These provisions are in the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002.